CBA to turn on Apple Pay in January

By James Eyers

Updated 14 Dec 2018 — 3:37 PM, first published at 11:00 AM

Commonwealth Bank of Australia will share a slice of its transaction revenue with the world's largest company, Apple, after relenting to customer demand and agreeing to turn on Apple Pay in January, a move which indicates the technology giant has the upper hand in the battle to control smartphone digital wallets.

More than two-and-a-half years after rival ANZ Banking Group made Apple Pay available, CBA's move will put pressure on National Australia Bank and Westpac Banking Corp, who continue to prevent their iPhone-carrying customers from using them or their Apple watches to make tap-and-go payments.

After sustaining a year of intense pressure at the banking royal commission, CBA's group executive for retail banking Angus Sullivan said CBA "heard repeatedly from our customers is that they want Apple Pay" and responding to that "underscores our commitment to becoming a better, simpler bank".

In January, CBA will allow its iPhone carrying customers to load their CBA credit and debit cards into Apple Pay, the technology giant's digital wallet.

CBA was planning to switch the service on earlier this week, but decided to take a conservative approach and wait for an unspecified date in January in order to avoid unnecessary pressure being placed on the payments system coming into the critical Christmas retail trading season. CBA has 10 million retail customers; there could be around five million customers with iPhones, given Apple penetration rates.

No commercial or operational details have been disclosed. It is understood that like other Apple Pay deals around the world, CBA will pay it a few cents per $100 of transactions. Apple Pay does not disclose customer numbers and has prevented them being disclosed by banks.

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There are 5200 banks in 26 global markets partnering with Apple on payments. This is up from 3500 banks in 12 countries two years ago. Apple Pay launched in Germany earlier this week.

Apple stands its ground

After ANZ broke ranks, CBA – alongside Westpac, NAB and Bendigo and Adelaide Bank – tried to fight against the tech giant, asking the competition regulator for special dispensation from commercial laws to boost the banks' bargaining power.

In submissions, the banks described Apple as being "intransigent, closed and controlling" and accused it of attempting to freeload on their contactless payments infrastructure while slowing innovation in digital wallets.

Jennifer Bailey, Apple's vice president of internet services, said CBA customers "will soon be able to benefit from a convenient and secure way to pay using the Apple devices." Bloomberg

But Apple fired back, arguing the only plausible explanation for the banks' behaviour is that they want to direct customers to their own proprietary apps – which will only provide access to their own credit and debit cards. In contrast, Apple Pay lets users toggle between their cards.

Jennifer Bailey, Apple's vice president of internet services, said in a statement on Friday: "Apple Pay is the No.1 mobile contactless payment service worldwide and we are thrilled Commonwealth Bank customers will soon be able to benefit from a convenient and secure way to pay using the Apple devices they love or within their favourite apps or on the web."

CBA said users will continue to receive all of the rewards and benefits offered by credit and debit cards. Bankwest cards will also be able to be uploaded to the Apple digital wallet in January. Apple Pay has been turned on by more than 40 other Australian lenders outside the big four, including Macquarie Bank, CUA, HSBC, ING and Latitude.

The service is making a push into internet payments to compete with the likes of PayPal and Afterpay. In Australia, the websites of fashion retailers Zara, Burberry, Politix and The Iconic have integrated Apple Pay. So has Deliveroo and JB Hi-Fi. It is also available to store loyalty and rewards points, including at Woolworths, and can be used at the turnstyles for Sydney trains.

If drivers' licences and Medicare cards are ultimately digitised, analysts expect the adoption of digital mobile wallets to increase, which would give Apple a growing slice of interchange fees generated from payments.

When it becomes available in January, the payments experience for CBA customers with iPhones will be greatly improved after the bank's work-around solution – a "PayTag" sticker, which could be stuck on the back of the device as an alternative to its antenna – failed to take off.

It remains to be seen if CBA adopts other learnings from Apple – like ANZ has. For example, ANZ created a new senior executive role of "chief design officer" – the same job title made famous by Apple's Jonathan Ive – and recruited Opher Yom-Tov from IDEO, the firm of industrial designers made famous by working with Apple co-founder Steve Jobs on the first Apple mouse.

In order to protect iPhone security, Apple continues to require all payments to be made through Apple Pay. Josh Robenstone